Mum's the Word on Hollywood's Mini-Recession:Sometimes Hollywood is Too Creative for its Own Goodfrom Daily VarietyWednesday, May 17, 1999

When price levels were on an even keel throughout the economy, Hollywood managed to create its own private inflationary cycle with production costs spiraling upward. And now, as economic indicators across the nation continue their resolute surge, Hollywood, ever-creative, has manufactured its own private mini-recession.

In some respects, the economic downturn in Tinseltown is following a predictable course. Big companies are downsizing, small ones are merging or going out of business and cost-cutting is rife.

In its specifics, however, the mini-recession, as with everything else in Hollywood, has veered away from classic economic models.

For one thing, it is oddly surreptitious, as though people feel it will go away if no one talks about it. “I can’t recall a time when so many of my clients were secretly putting their homes on the market and cutting back on their spending,” observes one of the town’s top attorneys.

One below-the-line artisan, who has always worked steadily and earns a sturdy six-figure income, told me, “I get calls from guys I’ve worked with who chat it up for a few minutes, then finally get around to asking if I know of any jobs around town. They don’t want to admit they’re hurting, but it usually turns out they haven’t had an offer for months.”

If the mini-recession is oddly secretive, it also is producing some seemingly contradictory policies that could cause damage long-term. For example:

STUDIOS ARE FIERCELY CUTTING below-the-line expenses, paying less to crews while working them harder. At the same time they’re lavishing ever greater sums of money on superstars, top composers, writers and the rest of the favored few. The result is an increasing Great Divide between the elite and the working stiffs.

They’re also virtually eradicating an entire spectrum of pro ducer and filmmaker studio deals, implicitly relying on squadrons of executives to identify new material and come up with creative ideas for developing and packaging it. “We’re redefining the producer as the guy who can produce half the money,” says a senior executive at a major studio.

In the midst of the new cost-consciousness, the power struggle between agents and managers seems an unwelcome intrusion. “In the present economy if a manager demands a big paycheck as a packager or executive producer, it’s going to come out of his client’s fee,” says one senior business affairs executive. “It becomes the talent’s problem.”

FACED WITH THE SILENT REALITIES of the mini-recession, Hollywood denizens are hurting, but they’re also adapting. Variety has been running an ongoing series of articles about the process of adaptation that reveals some shrewd maneuvers.

For example: Some grips and other below-the-line stalwarts are launching entrepreneurial sidelines, renting equipment to producers at discount prices, thus undercutting the studios while boosting their incomes.

Cinematographers are immersing themselves increasingly in TV, videos and commercials, mindful of the shrinking opportunities in features.

Producers have stepped up their efforts to come up with matching dollars from everyone from Internet companies to insurance entities in an effort to get their films started and also meet their overheads. The infusion of fresh capital from Europe also has spurred hopes.

Nonetheless, talent agencies and management firms are slicing overhead and shedding marginally productive employees. And a few grizzled veterans are taking early retirement.

All this is being done amid a discreet silence, to be sure. After all, the Hollywood recession is the only one taking place at the moment. Perhaps if everyone will just be quiet about it, maybe the goddamn thing will simply go away.